REVOLVING CREDIT AGREEMENT
THIS AGREEMENT dated as of October 1, 1996 between XXXXXX XXXXXX
HOLDING CORPORATION, a Texas corporation with its principal place of
business at 00000 Xxxxx Xxxxxx, Xxxxxx, Xxxxx 00000 ("Company"), and
EMERALD CAPITAL CORPORATION, a Virginia corporation with its principal
place of business at 0000 Xxxxxxx Xxxx, #000-000, XxXxxx, Xxxxxxxx
00000 ("Lender"). Company and Lender agree as follows:
Article I
Revolving Credit
1. Lender hereby establishes a Revolving Credit in favor of
Company on the terms hereof in an aggregate principal amount at any one
time outstanding not exceeding $10,000,000.
2. Subject to the provisions of this Agreement and if Company is
not in default hereunder and if no condition exists which, but for the
giving of notice or the lapse of time or both, would constitute an
event of default hereunder, the Company may avail itself of such
Revolving Credits, in whole or in part, from time to time. The amount
of any borrowing may be repaid in whole or in part within one (1) year
from the date of funding and such repaid amounts may be thereafter
reborrowed. The principal and accrued interest due on each borrowing
must be repaid within one (1) year from the date of funding.
3. At the time of each borrowing under the Revolving Credit,
Company shall execute and deliver to Lender a note ("Revolving Credit
Note") payable to the order of Lender for the amount of its loan to
Company. Each such Revolving Credit Note shall be in the form of
"Exhibit 1" attached hereto, with blanks suitably filled, shall be
dated the date of the borrowing, and shall mature on or before one (1)
year from the date of funding. The annual rate of interest before
maturity shall be at a rate equivalent to the rate described by the
Wall Street Journal as the prime rate in effect from time to time
(computed on a 365-day basis) ("Prime Rate"), plus one and one-half
percent (1.5%.)
Article II
Provisions Relative to Borrowing and Payments
1. Company shall give the Lender at least five full business
days notice of each proposed borrowing hereunder. Each borrowing under
the revolving credits shall be in units of at least $500,000. Not
later than 11 a.m. Dallas time on the day of a proposed borrowing,
Lender shall wire US federal funds to the Company's designated bank
account against delivery of the Revolving Credit Note for the
borrowing. Payments by Company shall be in accordance with the
Revolving Credit Note executed in connection with each borrowing.
2. By mutual agreement of the parties, Lender may convert any
outstanding principal balance and accrued interest to common stock of
the Company, according to such terms as may be mutually agreed at the
time of conversion.
Article III
Representations and Warranties
Company represents and warrants that:
1. The Annual Report on Form 10-K of Company and its
subsidiaries for fiscal year ended June 30, 1996, containing audited
financial statements of Company, heretofore furnished to Lender, are
complete and correct and fairly present the consolidated financial
condition of Company and its subsidiaries as at the date of said
Annual. To the best of Company's knowledge and belief, neither Company
nor any subsidiary has any material or substantial contingent
obligation or liability for taxes not disclosed by or reserved against
in said Annual Report. Since June 30, 1996, there has been no material
adverse change in the consolidated financial condition of Company and
its subsidiaries, except as may be reflected in a subsequent Quarterly
Report on Form 10-Q for subsequent fiscal quarter(s).
2. There are no suits or proceedings pending or, to Company's
knowledge, threatened against or affecting Company or any subsidiary
which, in the opinion of Company's counsel, will have a material
adverse effect on the financial condition or business of Company and
its subsidiaries.
3. Company has full power and authority to execute and perform
the terms and provisions of this Agreement and to borrow hereunder.
Article IV
Conditions of Borrowing
The obligation of Lender to lend hereunder is subject to the
satisfaction of the following conditions:
1. Company shall avail itself of the Revolving Credits to the
extent necessary to provide it with funds for any corporate purpose, to
be described and mutually agreed between the Lender and Company at the
time of each borrowing.
2. The Lender shall have received, from Xxxxx X. Xxxxxxxx,
General Counsel for Company, a favorable opinion to the effect that (a)
Company is a validly organized and existing corporation, (b) Company
has the power and authority to execute, deliver and carry out this
Agreement and has duly authorized its officers executing this Agreement
so to do, (c) the making of this Agreement by Company is not in
violation of any charter provision, bylaw, or regulation of Company, or
any contractual obligation binding upon Company, and (d) this Agreement
so executed and Company's notes given pursuant hereto will constitute
Company's valid and binding obligations.
3. Company shall have furnished to Lender a certified copy of
all resolutions of Company's Board of Directors pertaining to the
execution of this Agreement and the borrowing of money pursuant hereto.
Article V
Affirmative Covenants
1. Company covenants and agrees that until all indebtedness
incurred hereunder has been paid in full and Company no longer has the
right to borrow hereunder, it will:
(a) Furnish to Lender, not later than 120 days after the end
of each fiscal year, an Annual Report on Form 10-K of Company and its
subsidiaries for such year, certified by the Company's independent
public accountants;
(b) Furnish to Lender, not later than 60 days after the
close of each quarter-annual period (except the last quarter-annual
period of each year), a Quarterly Report on Form 10-Q of Company and
its subsidiaries for the current fiscal year to and including the
period then ending, certified by an appropriate officer of Company;
(c) From time to time furnish to Lender all financial
information, including proxy statements, furnished by Company to its
shareholders;
(d) At all times keep its property insured against loss or
damage to the extent and against the risks that similar property is
usually insured by other companies engaged in the same business, and
will cause its subsidiaries to do the same; and
(e) Promptly pay and discharge, and cause its subsidiaries
to pay and discharge, all taxes and assessments levied and assessed or
imposed upon its property or upon its income as well as all claims
which, if unpaid, might by law become a lien or charge upon its
property. Nothing herein contained, however, shall require Company or
any subsidiary to pay any such taxes, assessments or claims so long as
Company or such subsidiary in good faith contests the validity and
stays the execution and enforcement thereof.
2. At the time of furnishing each financial statement specified
in this Article V, Section 1(a) and (b) hereof, Company shall furnish
to Lender upon request an officer's certificate stating that there
exists no event of default, as defined hereinbelow, or if any such
event of default exists, specifying the nature thereof, the period of
existence thereof, and what action Company proposes to take with
respect thereto.
Article VI
Negative Covenants
1. Company covenants and agrees that until all indebtedness
incurred hereunder has been paid in full and Company no longer has the
right to borrow hereunder, it will not pay or declare any dividend on
its common stock at any time after the date of this Agreement, or at
any time after said date make any other distribution on account of any
class of its stock, or redeem, purchase or otherwise acquire, directly
or indirectly, any shares of its stock of any class. Notwithstanding
the foregoing limitation, however, Company may expend after the date of
this Agreement for all of such purposes an amount not in excess of (1)
$10,000,000, plus (2) the consolidated net earnings of Company after
the date of this Agreement, determined in accordance with generally
accepted accounting principles. In addition to the foregoing, Company
may, after the date of this Agreement, expend (i) for the purpose of
purchasing and retiring its shares of any class an amount equivalent to
the cash and the fair value of property (as determined in good faith by
Company's Board of Directors at the time of acquisition) received after
said date by Company in exchange for the issuance of its stock of any
class, plus (ii) the amount required for the purpose of redeeming its
presently outstanding preferred stock, plus (iii) any amount expended
by Company to purchase its own stock pursuant to its deferred
compensation plan. For the purpose of making any computation required
by this paragraph, consolidated net earnings shall be computed for the
period (taken as one accounting period) commencing on the date of this
Agreement and terminating at the end of the last fiscal quarter
preceding the date of any payment for the purposes mentioned in this
paragraph.
2. Company covenants and agrees that until all indebtedness
incurred hereunder has been paid in full and Company no longer has the
right to borrow hereunder, it will not and will not permit any
subsidiary to:
(a) Create, assume, or suffer to exist any mortgage, pledge,
encumbrance, lien, or charge of any kind upon any of its property or
assets, whether now owned or hereafter acquired, except (1) liens for
taxes not yet due or which are being contested in good faith by
appropriate proceedings, (2) other liens, charges and encumbrances
incidental to the conduct of its business or the ownership of its
property and assets which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits, and which
do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the
operation of its business, (3) mortgages or other liens on property or
assets of a subsidiary to secure obligations of such subsidiary to
Company or another subsidiary, or (4) purchase money obligations not
exceeding $2,000,000 in the aggregate at any one time outstanding;
(b) Create, incur, or suffer to exist any funded or current
debt, except (1) funded or current debt represented by the Revolving
Credit Notes and the Term Notes, (2) funded or current debt represented
by purchase money obligations permitted by the provisions of this
Article VI Section 2(a), (3) funded or current debt owing by any
subsidiary to Company or to any other subsidiary, (4) guarantees and
other contingent liabilities permitted by the provisions of this
Article VI, Section 2(c), (5) current debt of Company (other than debt
evidenced by the Revolving Credit Notes) not in excess of $10,000,000
at any time outstanding;
(c) Assume, guarantee, endorse, contingently agree to
purchase, or otherwise become liable upon the obligation of any person,
firm, or corporation, except by the endorsement of negotiable
instruments for deposit or collection, in excess of $10,000,000 for the
amount of all such guarantees, endorsements, and other contingent
liabilities at any one time outstanding;
(d) Sell or otherwise dispose of any shares of stock or
funded or current debt of any subsidiary except to Company or another
subsidiary, except that all shares of stock and debt of any subsidiary
at the time owned by or owed to Company and all subsidiaries may be
sold as an entirety for a cash consideration which represents the fair
value (as determined in good faith by Company's Board of Directors) at
the time of sale of the shares and debt so sold, if the assets of such
subsidiary do not constitute a substantial part of the consolidated
assets of Company and all subsidiaries, and also if, at the time of
such sale, such subsidiary does not , directly or indirectly own any
shares of stock or debt of any other subsidiary (unless all of the
shares of stock and debt of such other subsidiary are simultaneously
being sold as permitted by this Section 2(d));
(e) Merge or consolidate with any other corporation, or
sell, lease, transfer or otherwise dispose of all or a substantial part
of its assets, except that (1) any subsidiary may merge or consolidate
with Company (if Company is the continuing or surviving corporation) or
with any one or more other subsidiaries, (2) any subsidiary may sell,
lease, transfer or otherwise dispose of any of its assets to Company or
another subsidiary, (3) any subsidiary may sell or otherwise dispose of
all or substantially all of its assets subject to the conditions
specified in Section 2(d) of this Article VI with respect to a sale of
the stock of such subsidiary, (4) Company and any subsidiary may sell
in the ordinary course of their respective businesses products
manufactured by either of them, and (5) Company may merge or
consolidate, or sell of dispose of all or substantially all of its
assets, if (i) Company is the continuing or surviving corporation, or
(ii) the successor or acquiring corporation assumes all of Company's
obligations under this Agreement and on the notes, including all
covenants herein and therein contained, and (iii) Company as the
continuing or surviving corporation or the successor or acquiring
corporation, as the case may be, is not, immediately after such merger
or consolidation, or such sale or other disposition, in default under
any of such obligations;
(f) Enter into, or permit to remain in effect, any
agreements to rent or lease any real property used for manufacturing
operations providing for payments in excess of an aggregate of $500,000
per annum by Company and all subsidiaries;
(g) Enter into any arrangement with any bank, insurance
company, or other lender or investor providing for the leasing by
Company or any subsidiary of real property which has been or is to be
sold or transferred by Company or any subsidiary to such lender or
investor; or
(h) Discount or sell with recourse, or sell for less than
the face value thereof, any of its notes or accounts receivable, except
that Company may discount or sell with recourse notes and accounts
receivable received by it from the sale of its products, if the
contingent liability on all such notes and accounts receivable does not
exceed an aggregate of $10,000,000 at any time outstanding.
3. Company covenants that it will not permit any subsidiary to
lease, sell, or dispose of any shares of any class of its stock (other
than Directors' qualifying shares) except to Company or another
subsidiary.
Article VII
Events of Default
The following shall constitute Events of Default under this
Agreement: (a) Company defaults in the payment of any principal on any
note when it becomes due, either under the terms of the note or
otherwise as provided herein; (b) Company defaults in the payment of
any interest on any note for more than 15 days after the due date; (c)
any material representation or warranty made by Company herein or in
any writing furnished in connection with or pursuant to the Agreement
is false in any material respect on the date made; (d) Company defaults
in the performance or observance of any other agreement, term, or
condition contained herein, and such default is not remedied within 30
days after Company receives written notice thereof from Lender; (e)
Company or a subsidiary makes an assignment for the benefit of
creditors; (f) Company or a subsidiary, after the date of this
Agreement, petitions or applies to any tribunal for the appointment of
a trustee or receiver, either of it or of a substantial part of its
assets, or commences any proceedings relating to it under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, or liquidation law of any jurisdiction; (g) any such
petition or application is filed, or any such proceedings are
commenced, against Company or a subsidiary, and Company or such
subsidiary by any act indicates its approval, consent, or acquiescence,
or an order is entered appointing such trustee or receiver,
adjudicating Company or a subsidiary bankrupt or insolvent, or
approving the petition in any such proceedings, and such order remains
in effect for more than 60 days or (h) an order is entered in any
proceedings against Company decreeing its dissolution or split-up, and
such order remains in effect for more than 60 days. If any one or more
of the above Events of Default occur and continue past any specified
grace period, Lender may, by written notice to Company, declare all of
the notes to be immediately due and payable, together with interest
accrued thereon.
Article VIII
Definitions
For the purpose of this Agreement, the following terms shall have
the following meanings:
1. "Person" shall mean and include an individual, a partnership,
a limited liability company, a corporation, a trust, an unincorporated
organization, and a government or any department or agency thereof;
2. "Subsidiary" shall mean any corporation organized under the
laws of any state of the United States of America, Puerto Rico, Canada,
or any province of Canada, a majority of the voting stock of which
shall, at the time as of which any determination is being made, be
owned by Company, either directly or through subsidiaries;
3. "Purchase Money Obligations" shall mean (a) indebtedness
secured by an existing mortgage or other lien on property hereafter
acquired by Company or a subsidiary, or (b) indebtedness which is
issued as, or the entire proceeds of which are used to pay, a part of
the purchase price paid for property hereafter acquired, regardless of
whether such indebtedness is secured by a mortgage or other lien on
such property provided, however, that as to each such after-acquired
property, the liens thereon immediately after the acquisition thereof
shall be confined solely to such property and the aggregate amount of
all indebtedness secured thereby or the unsecured indebtedness created
for the purpose of paying part of the purchase price of such property,
as the case may be, shall not exceed 66.66 percent of the lower of cost
or fair value (as determined in good faith by Company's Board of
Directors) of such property at the time of acquisition;
4. "Funded debt" shall mean any obligation payable more than one
year from the date of the creation thereof, which under generally
accepted accounting principles is shown on the balance sheet as a
liability, and "current debt" shall mean any obligation for borrowed
money (and any negotiable instruments payable and drafts accepted
representing extensions of credit whether or not representing
obligations for borrowed money) payable on demand or within a a period
of one year from the date of the creation thereof. Any obligation,
however, shall be treated as funded debt, regardless of its term, if it
is renewable pursuant to the terms thereof or of a revolving credit or
similar agreement effective for more than one year after the date of
the creation of such obligation, or may be payable out of the proceeds
of a similar obligation pursuant to the terms of such obligation or of
any such agreement. "Debt" shall include guarantees, endorsements, or
other contingent liabilities in connection with the obligations, stock,
or dividends of any person, other than endorsements in the ordinary
course of business of negotiable instruments in the course of
collection.
5. "Event of default" shall mean any event specified in Article
VI, provided that every requirement in connection with such event for
the giving of notice, the lapse of time, or the happening of any
further condition, event or act has been satisfied. "Default" shall
mean any of such events, regardless of whether any such requirement has
been satisfied.
6. "Officer's certificate" shall mean a certificate signed in
the name of Company by its President or one of its Vice Presidents.
7. "Note" shall mean and include both the Revolving Credit Notes
and the Term Notes.
Article IX
Miscellaneous
1. This Agreement may be amended, and Company may take any
action herein prohibited, or omit to perform any act herein required to
be performed if it obtains the written consent of Lender.
2. All representations and warranties contained herein or made
in writing by Company in connection herewith shall survive the
execution and delivery of this Agreement and of the notes.
3. All covenants and agreements in this Agreement contained by
or on behalf of either party to shall bind and inure to the benefit of
its respective successors and assigns.
4. All communications provided for hereunder shall be sent by
first class mail addressed to each party at the address shown in the
first paragraph of this Agreement above, attention President, or to any
other address of which either party notifies the other in writing.
5. No delay or failure by Lender to exercise any right or remedy
under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise
expressly provided herein. The rights and remedies expressly specified
herein are cumulative and not exclusive of Lender' other rights and
remedies.
6. This Agreement shall terminate when Company no longer has the
right to borrow hereunder and all notes issued pursuant hereto have
been paid in full.
7. This Agreement may be executed in any number of copies and
separate counterparts. Complete sets of counterparts executed by all of
the parties shall be filed with Company and Lender.
The parties hereto have caused this Agreement to be duly executed
by their respective duly authorized officers as of the day and year
first above written.
COMPANY: XXXXXX XXXXXX HOLDING CORPORATION
By: /S/ Xxx Xxxxxx
Xxxxxxx X. Xxxxxx, President
LENDER: EMERALD CAPITAL CORPORATION
By: /s/ Xxxxxxx Herik
Xxxxxxx Herik, President
Exhibit 1
$____________________, 19_____
On or before _____________________ (1yr.), for value received, the
undersigned promises to pay to the order of EMERALD CAPITAL CORPORATION
the sum of $_____________, with interest payable quarter-annually and
at maturity at a rate equivalent to the rate described by the Wall
Street Journal as the prime rate in effect from time to time (computed
on a 365-day basis) ("Prime Rate"), plus one and one-half percent
(1.5%.) After maturity, both principal and interest shall bear
interest at the same rate, and both principal and interest are payable
in lawful money of the United States at the main office of the payee
hereof.
This Note is issued pursuant to an Agreement between the
undersigned and Lender dated as of October 1, 1996 to which Agreement
reference is hereby made for a description of the right of the maker to
anticipate payment hereof, the conditions upon which the maturity
hereof may be accelerated by the holder, and other terms and conditions
upon which this Note is issued.
XXXXXX XXXXXX HOLDING CORPORATION
By:______(Form only)____________
Xxxxxxx X. Xxxxxx, President
